Airlines could lose $63 billion to $113 billion in revenue for passenger traffic globally in 2020, depending on how the coronavirus spreads, the International Air Transport Association (IATA) said on Thursday.
The last time the industry faced a revenue shock of this magnitude was in 2009 during the global financial crisis, IATA Chief Economist Brian Pearce said at a media briefing in Singapore.
The $63 billion figure is for a scenario where the disease is contained in current markets with over 100 cases as of March 2, following a v-shaped recovery, IATA said.
The $113 billion estimate is for a scenario with a broader spreading of the disease.
This fall would translate to 11%-19% of worldwide passenger revenue loss.
IATA on Feb. 20 estimated the outbreak would cost carriers $29.3 billion in revenue, if the outbreak was largely confined to markets associated with China.
Financial markets have reacted strongly. Airline share prices have fallen nearly 25% since the outbreak began, some 21 percentage points greater than the decline that occurred at a similar point during the SARS crisis of 2003. “To a large extent, this fall already prices in a shock to industry revenues much greater than our previous analysis,” IATA said.
Oil prices have fallen significantly (-$13/barrel Brent) since the beginning of the year. This could cut costs up to $28 billion on the 2020 fuel bill (on top of those savings which would be achieved as a result of reduced operations) which would provide some relief but would not significantly cushion the devastating impact that COVID-19 is having on demand, IATA said, adding it should be noted that hedging practices will postpone this impact for many airlines.
“The turn of events as a result of COVID-19 is almost without precedent. In little over two months, the industry’s prospects in much of the world have taken a dramatic turn for the worse. It is unclear how the virus will develop, but whether we see the impact contained to a few markets and a $63 billion revenue loss, or a broader impact leading to a $113 billion loss of revenue, this is a crisis.
“Many airlines are cutting capacity and taking emergency measures to reduce costs. Governments must take note. Airlines are doing their best to stay afloat as they perform the vital task of linking the world’s economies. As governments look to stimulus measures, the airline industry will need consideration for relief on taxes, charges and slot allocation. These are extraordinary times,” said Alexandre de Juniac, IATA’s Director General and CEO.